A first attempt fell victim to the crisis: now in the docks of Scotland’s ancient capital, a second-generation scarlet Sea Snake is being prepared to harness the waves of Britain’s northern islands to generate electricity.

Dwarfed by 180 metres of tubing, scores of engineers clamber over the device, which is designed to dip and ride the swelling sea with each move being converted into power to be channelled through subsea cables.

Due to be installed next spring at the European Marine Energy Centre (EMEC) in Orkney, northern Scotland, the wave power generator was ordered by German power company E.ON, reflecting serious interest in an emerging technology which is much more expensive than offshore wind.

Interest from the utility companies is driven by regulatory requirements to cut carbon emissions from electricity generation, and it helps in a capital-intensive sector.

Venture capitalists interested in clean tech projects typically have shorter horizons for required returns than the 10-20 years such projects can take, so the utilities’ deeper pockets and solid capital base are useful.

“Our view … is this is a 2020 market place,” said Amaan Lafayette, E.ON’s marine development manager. “We would like to see a small-scale plant of our own in water in 2015-2017, built on what we are doing here. It’s a kind of generation we haven’t done before.”

The World Energy Council has estimated the market potential for wave energy at more than 2,000 terawatt hours a year — or about 10% of world electricity consumption — representing capital expenditure of more than 500 billion pounds ($790 billion).

Island nation Britain has a leading role in developing the technology for marine power, which government advisor the Carbon Trust says could in future account for 20% of the country’s electricity. The government is stepping up support as part of a 405 million pound investment in renewable energy to help its ambition of cutting carbon emissions by 80% by 2050 from 1990 levels, while securing energy supply. (The challenge is more about getting to a place where we are comparable with other renewable technologies… We want to get somewhere around offshore wind,” said Lafayette.)

Britain’s Crown Estate, which owns the seabed within 12 nautical miles of the coast, is also holding a competition for a commercial marine energy project in Pentland Firth in northern Scotland.

Besides wave power, Britain is testing systems to extract the energy from tides: private company Marine Current Turbines Ltd (MCT) last year opened the world’s first large-scale tidal turbine SeaGen in Northern Ireland.

DEVELOPING LIKE WIND

“We are often compared to the wind industry 20 years ago,” said Andrew Scott, project development manager at Pelamis Wave Power Ltd, which is developing the Sea Snake system, known as P2. Standing beside the train-sized serpent, Pelamis’ Scott said wave power projects are taking a variety of forms, which he said was similar to the development of the wind turbine. “You had vertical axis, horizontal axis and every kind of shapes before the industry consolidated on what you know as acceptable average modern day turbines.”

The Edinburgh Snake follows a pioneering commercial wave power project the company set up in Portugal last September, out of action since the collapse of Australian-based infrastructure group Babcock & Brown which held a majority share. “It’s easy to develop your prototypes and models in the lab, but as soon as you put them in water, it swallows capital,” said John Liljelund, CEO of Finnish wave energy firm AW-Energy, which just received $4.4 million from the European Union to develop its WaveRoller concept in Portugal.

At present, industry executives say marine power costs about double that from offshore wind farms, which require investment of around 2-3 million euros per megawatt. Solar panels cost about 3-4 million per megawatt, and solar thermal mirror power about 5 million.

UTILITY ACTION

Other utility companies involved in wave power trials include Spain’s Iberdrola, which has a small experimental wave farm using floating buoys called “Power Take- offs” off the coast of northern Spain. It is examining sites for a subsea tidal turbine project made by Norwegian company Hammerfest Strom.

Countries developing the technology besides Britain include Portugal, Ireland, Spain, South Korea and the United States: about 100 companies are vying for a share of the market, but only a handful have tested their work in the ocean.

Privately owned Pelamis has focussed on wave energy since 1998, has its own full-scale factory in Leith dock and sees more orders for the second generation in prospect.

Lafayette said E.ON examined more than 100 devices since 2001 before picking Sea Snake for its first ocean project, a three-year test: “They have a demonstrable track record … and commercial focus and business focus.”

A single Sea Snake has capacity of 750 kilowatts: by around 2015, Pelamis hopes each unit will have capacity of 20 megawatts, or enough to power about 30,000 homes.

Neither Pelamis nor E.ON would elaborate on the cost of the Sea Snake, but they said the goal is to bring it down to the level of offshore wind farms.

On January 26, 2009, Lockheed Martin and Ocean Power Technologies agreed to work together to develop a commercial-scale wave energy project off the coasts of Oregon or California.

OPT is providing their expertise in project and site development as they build the plant’s power take-off and control systems with their PowerBuoy for electricity generation. Lockheed will build, integrate and deploy the plant as well as provide operating and maintenance services. Lockheed and OPT have already worked together on maritime projects for the U.S. government.

Spanish utility Iberdrola is using OPT’s PowerBuoy on the Spainish coast in Santoña for first phase deployment, hoping to become the first commercial-scale wave energy device in the world. In the Spainish project, Lockheed and Ocean Power are working toward an increased cost-performance of a power-purchasing agreement from which this U.S. wave energy project may benefit.

– Deployed and tested a PowerBuoy off the coast of Spain under the wave power contract with Iberdrola

– Awarded $2.0 million from the US Department of Energy in support of OPT’s wave power project in Reedsport, Oregon

– Deployed and tested a PowerBuoy for the US Navy at a site off Marine Corps Base Hawaii, on the island of Oahu

– Ocean-tested 70 miles off the coast of New Jersey an autonomous PowerBuoy developed specifically for the US Navy’s ocean data gathering program

– Awarded $3.0 million contract from the US Navy for the second phase of their ocean data gathering program

– US Congress passes bill which provides for wave power to qualify for the US production tax credit

Dr. George Taylor, OPT’s CEO, said, “We have maintained the positive momentum with which we began the 2009 fiscal year, and have made significant progress under a number of contracts during the quarter, most notably with the US Navy and Iberdrola. In September, we deployed a PB40-rated PowerBuoy in Spain under our contract with Iberdrola, one of the world’s largest renewable energy companies. OPT also tested one of its autonomous PowerBuoy systems off the coast of New Jersey in October, under contract from the US Navy in connection with the Navy’s Deep Water Active Detection System (“DWADS”) initiative. We ended the second quarter with a PowerBuoy deployment for the US Navy in Hawaii. We have also furthered our relationship with this significant partner and announced a $3.0 million contract for participation in the second phase of the US Navy’s DWADS program.”

“We expect that the US Government’s recent expansion of the production tax credit to now include wave energy will help better position OPT competitively in the alternative energy arena. We are also gratified by signs that the Obama administration in the United States is keen on leveraging renewable energy sources as commercial sources of energy for the country. The $2.0 million award we received this quarter from the Department of Energy, in support of our work in Reedsport, Oregon, is reflective of the US Government’s support for wave energy,” Dr. Taylor concluded.

More about OPT

OPT has seen strong demand for wave energy systems as evidenced by record levels of contract order backlog, currently at $8.0 million. OPT continues to make steady progress on development of the 150 kW-rated PowerBuoy (PB150), which comprises a significant portion of our current backlog. The design of the PB150 structure is on track to be completed by the end of calendar year 2008, and is expected to be ready for complete system testing in 2009. OPT continues to work actively with an independent engineering group to attain certification of the 150 kW PowerBuoy structure design.

OPT’s patent portfolio continues to grow as one new US patent was issued during the second quarter of fiscal year 2009. The Company’s technology base now includes a total of 39 issued US patents.

During the second quarter of fiscal 2009, the Company announced that it expects to benefit from the energy production tax credit provision of the Energy Improvement and Extension Act of 2008. Production tax credit provisions which were already in place served only to benefit other renewable energy sources such as wind and solar. The Act will, for the first time, enable owners of wave power projects in the US to receive federal production tax credits, thereby improving the comparative economics of wave power as a renewable energy source.

OPT is involved in wave energy projects worldwide:

REEDSPORT, OREGON, US – OPT received a $2.0 million award from the US Department of Energy (DoE), in support of OPT’s wave power project in Reedsport, Oregon. The DoE grant will be used to help fund the fabrication, assembly and factory testing of the first PowerBuoy to be installed at the Reedsport site. This system will be a 150 kW-rated PB150 PowerBuoy, major portions of which will be fabricated and integrated in Oregon. OPT is working closely with interested stakeholder groups at local, county and state agency levels while also making steady progress on the overall permitting and licensing process.

SPAIN – OPT deployed and tested its first commercial PowerBuoy under contract with Iberdrola S.A., one of the world’s largest renewable energy companies, and its partners, at a site approximately three miles off the coast of Santona, Spain. The enhanced PB40 PowerBuoy, which incorporates OPT’s patented wave power technology, is the first step of what is expected to be a utility-grade OPT wave power station to be built-out in a later phase of the project.

ORKNEY ISLANDS, UK – OPT is working under a contract with the Scottish Government at the European Marine Energy Centre (“EMEC”) in the Orkney Islands, Scotland to deploy a 150 kW PowerBuoy. OPT is currently working on building the power conversion and power take-off sub-assemblies. The Company is also reviewing prospective suppliers for manufacturing of the PowerBuoy, which is on track to be ready for deployment by the end of calendar year 2009. As part of its agreement with EMEC, OPT has the right to sell power to the grid up to the 2MW berth capacity limit, at favorable marine energy prices.

CORNWALL, UK –The “Wave Hub” project developer, South West of England Regional Development Agency (“SWRDA”), recently appointed an engineering contractor to manage the construction of the “Wave Hub” marine energy test site. SWRDA has forecasted that the Wave Hub connections, cabling and grid connection infrastructure will be completed by the end of the 2010 calendar year. OPT continues to work with SWRDA and is monitoring its progress in developing the project site.

HAWAII, US – OPT deployed its PowerBuoy systems near Kaneohe Bay on the island of Oahu. The PowerBuoy was launched under OPT’s on-going program with the US Navy at a site off Marine Corps Base Hawaii and will be connected to the Oahu power grid.

US NAVY DEEP OCEAN APPLICATION – OPT tested one of its autonomous PowerBuoy systems 70 miles off the coast of New Jersey. The PowerBuoy was constructed under contract from the US Navy in connection with the Navy’s DWADS initiative, a unique program for deep ocean data gathering. The Company received a $3.0 million contract award for the second phase of the program, which is for the ocean testing of an advanced version of the autonomous PowerBuoy.

About 60 miles north of San Francisco, the strip malls of Solano County give way to gently rolling hills where, as far as the eye can see, wind turbines sprout from the golden bluffs overlooking the Sacramento delta. Construction on Solano’s newest turbine farm, Shiloh II, began this summer, part of a wind rush that has transformed the U.S. into the world’s biggest wind market.

An estimated 8,000 megawatts of new capacity will be installed in the U.S. in 2008. That’s enough electricity for nearly three million homes, and it represents a jump of 50% on the heels of last year’s 45% increase. Among the forces driving growth: Congress’s extension last month of a key tax credit and state mandates requiring utilities to tap renewable energy. “Utilities are going to take wind and run with it,” Jeff Immelt, CEO of General Electric, the nation’s biggest turbine maker, said recently. Global growth remains strong as well, with generation capacity continuing to increase at a 30% annual clip, although the credit crunch could slow expansion in the near future.

And it is a truly global business. Take a closer look, for instance, at Shiloh II.

The 150-megawatt project is being developed by enXco, the U.S. subsidiary of French energy giant EDF. The turbines that lie scattered around the construction site like giant Tinkertoys were made by Germany’s REpower, itself acquired last year by Suzlon, an Indian wind-machine manufacturer that has relocated its global headquarters – to Denmark. “If you want to invest in wind, you’re generally looking at overseas stock markets,” says Ethan Zindler, head of North American research for New Energy Finance, a London-based research firm.

Moreover, while wind power has attracted some big names like GE and FPL Group, the business plays only a minor role in their portfolios. Most pure wind outfits are far smaller and can be very volatile – and they tend to sport high price/earnings ratios, despite recent stock drops. With that caution in mind, and after talking to industry insiders and poring over financial reports, we came up with the four intriguing wind stocks discussed below. They are speculative bets, so intrepid investors should check them out carefully before putting any money at risk.

Four ways to bet on wind power

Wind stocks generally come in two varieties: equipment makers, which produce turbines and other hardware, and developers, which build power plants. Among developers, Iberdrola Renewables (IBR.MC), traded on the Madrid stock exchange, is the name to know. Spun out from the big Spanish power company Iberdrola last year, it is the world’s largest wind-power developer, with sales of $1.4 billion in 2007, expected to rise to $2.8 billion this year.

The U.S. is Iberdrola’s largest market outside Spain and will drive its expansion. Terry Hudgens, CEO of Iberdrola Renewables’ North American operations, says the company plans to install 1,000 megawatts of new wind capacity a year in the U.S. “We secured this pipeline years ago, before these other companies decided to get into the U.S.,” he says. The company is growing fast: In its most recent quarter Iberdrola saw sales of $698 million, up nearly 200% from the same quarter a year ago, while pretax profit rose nearly 600%, to $153 million. And the stock has a highfliers’ P/E of nearly 40.

Iberdrola buys turbines from Suzlon, Mitsubishi, Siemens, Vestas, and GE. But its biggest supplier is Spanish company Gamesa (GAM.MC). In fact, Iberdrola just placed the largest turbine order on record with Gamesa, which is now the No. 2 turbine maker in the world. Gamesa’s P/E of 18 is double the industry average, but its profits are expected to grow 30% this year.

The No. 1 windmill maker, with 23% of the world market, is Vestas (VWS.CO), traded on the Copenhagen exchange. It saw revenues grow 26% in 2007, to $7.2 billion, and it has a market cap of nearly $11 billion. The appeal of the stock for wind investors, says London-based Citigroup analyst Mark Fielding, is that “its market-leading positions make it a proxy for the overall strength of the market.”

Finally, an upstart to watch is Clipper Windpower (CWP), which is based in California but trades in London. Customers for its 2.5-megawatt Liberty turbine include FPL, BP – which is developing the world’s largest wind farm with the company – and Queen Elizabeth II, who bought the prototype of a ten-megawatt offshore windmill. Its shares dropped 78% this year over quality issues, but those glitches have been fixed, says CEO Doug Pertz. Clipper lost money in 2007 and will do so again in 2008. Still, analysts and industry insiders say that its innovative technology and the strong demand for turbines could make it a winner in the long run.

Ocean Power Technologies, Inc., a New Jersey publicly-traded company deployed its first PowerBuoy with Iberdrola S.A, a Spanish renewable energy company, and its partners, at a site approximately three miles off the coast of Santoña, Spain.

As noted by Iberdrola, the deployment of OPT’s PB40 PowerBuoy is the latest milestone toward the building of the world’s first commercial utility-scale wave power generation venture to supply approximately 1.39 MW of electricity into Spain’s electricity grid. The PB40, incorporating OPT’s patented wave power technology, is the first of what is expected to be a 10-PowerBuoy wave power station to be built out in a later phase of the project, and generating enough electricity to supply up to 2,500 homes annually.

Mark R. Draper, Chief Operating Officer of OPT, said: “This deployment is of great significance to OPT and the wave power industry, demonstrating the commercial potential of our leading technology after a decade of in-ocean experience. We now look forward to the first supplies of electricity to the grid and the expansion of the wave power station.”

The project began with OPT’s development of the Santoña site, followed by OPT’s receipt of the Engineering, Procurement and Construction (EPC) contract under which it would build and install the first PB40 PowerBuoy system, subsea power transmission cable and underwater substation and grid connection. In a subsequent agreement, OPT was also contracted for operations and maintenance (O&M) of the wave power station for up to 10 years. A special purpose company with Iberdrola as its major shareholder and OPT as a 10% shareholder has also been established for the purchase of the wave power station and the O&M services from OPT.

PowerBuoys provide a minimal visual profile due to most of their structure being submerged. They have a design life of 30 years with standard maintenance recommended every three to four years. The grid connection system for the PowerBuoys has been certified by an independent engineering firm.

The PB40 steelwork was fabricated by a local supplier in Santander, Spain, and the power take-off and control system was built at OPT’s facility in New Jersey, USA. The final integration and testing of the complete PowerBuoy was also conducted in Spain. The PowerBuoy is seven meters in diameter at the sea surface, 20 meters in length and weighs approximately 60 tonnes.

Albany — New York utility regulators have given the global energy company Iberdrola the go-ahead to buy Energy East.

The 4-0 vote by New York’s Public Service Commission yesterday clears the way for the $4.6 billion deal, which includes Energy East subsidiaries Rochester Gas and Electric Corp. and New York State Electric and Gas.

Energy East also owns power companies in Maine, Connecticut, and Massachusetts, where regulators have already approved the takeover. But New York’s approval comes with a series of conditions that Iberdrola hasn’t yet accepted.

The commissioners, who have had Iberdrola’s proposal before them for more than a year, characterized their decision as a compromise that protects Energy East’s customers while not imposing conditions so onerous they’d cause Iberdrola — which is based in Spain — to nix the buyout.

“This isn’t a perfect deal, and it might not be a great deal,” commissioner Maureen Harris said before casting her vote. “In my opinion, it’s a good deal, and I’m not willing to risk having the company walk away from it.”

Iberdrola had no immediate comment except to say that it looks forward to reviewing the order to determine what steps it will take next.

Staff analysts at the PSC had argued for months against the deal because of concerns about whether it would best serve the public in terms of cost and competitiveness. They laid out a series of conditions they said the agency’s decision-making panel should impose before the deal could go through.

Yesterday’s approval addressed most of the issues staff analysts raised, though the conditions were significantly scaled back from their original recommendations.

For example, the commissioners required Iberdrola to put aside $275 million to offset future rate increases. That’s compares with the $646 million PSC staff analysts initially proposed as a condition of the sale.

PSC staff analysts also initially said Iberdrola should be required to sell its interest in wind and hydropower generating plants as a condition of the deal. That was in keeping with a state policy that power companies shouldn’t own both transmission lines and generating plants, which might give them too much control over setting prices.

Iberdrola — which has wind projects from the Pacific Northwest to Europe — strongly objected to that demand and sought help from state and federal officials, including Senator Schumer, who said he lobbied the PSC chairman, Garry Brown, to find a compromise.

The commission said yesterday that Iberdrola must sell the fossil fuel generating plants but may keep the wind energy plants as long as it commits to spending up to $200 million on wind energy development in the state. The company has publicly said it will spend $2 billion on wind energy in New York, but it hasn’t made a firm commitment.

Under the terms the PSC laid out, Iberdrola would also be required to make any future investments in wind energy using money from a non-Energy East subsidiary.

“We have argued long and hard for Iberdrola’s ability to develop wind power, and we very much urge them to accept this ruling,” Mr. Schumer said in a prepared statement after the PSC’s decision.

It’s not clear, however, if the company will go along with the conditions. A spokesman for the PSC said the agency expects to issue a written order spelling them out within a few days, and it’s up to Iberdrola to accept or reject the offer.

Spanish utility Iberdrola Renewables S.A. has been awarded the license to market natural gas in Portugal’s liberalized energy market by the country’s Directorate General of Energy and Geology, with support from the Portuguese Ministry of Economy and Innovation.

Pursuant to the terms of this authorization, Iberdrola will be able to import, export and market natural gas and liquefied natural gas (LNG), as well as buy and sell natural gas wholesale and sell it to the Portuguese retail clients.

Iberdrola hopes to become one of the operators of reference in Portugal’s gas market with the chance to take advantage of the market’s incipient liberalization, which began in July 2007.

The Spanish utility, which is already present in the areas of generation and marketing of electricity and renewable energies in Portugal, is also taking a further step in order to strengthen its presence in the country’s energy market. Iberdrola is also promoting the construction of an 850MW combined cycle power plant in the locality of Figueira da Foz and hopes to obtain the definitive award to carry out work for the 1,134MW Alto Tamega hydroelectric complex.

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